24-28pt drop for relatively small increase in utilization

[Zoostation1]

My FICO9 scores that I pulled today dropped by 28pts (EQ), 24pts (TU) and 25pts (EX) after going from AZEO with 5% on one card, 0% second card, 4% aggregate) to 10% one card, 6% second card, 9% aggregate.  Does that seem normal?  I was expecting a a decrease from my June scores but not that significant.  FICO8 scores didn't get impacted much except for EQ.  -16 (EQ) even (TU) -3 (EX).  I don't have high limits on my cards ($2000 and $400 for the reporting, though that $400 has since become $1800) so even small changes in when things are paid off hit utilization harder.  Nothing else on my reports have changed, but since I may apply for another card in the next few months I want to make sure my 8 and 9 rebound as quickly as they dropped.

[TheKid2]

I'm in a dirty scorecard and my scores get hit pretty hard when my util goes up. I will say your numbers don't seem that bad for those score drops. Definitely should AZEO into the app!

[Zoostation1]

I definitely will be back on AZEO before applying and my scorecard is dirty as well.  My BK7 was filed 4yr8mo ago but just started my rebuild 7-8 months ago.  It's just really frustrating to be penalized so heavily for what's reporting on the closing date when I'm PIF roughly every week and not paying interest. Had several transactions hit one day later I would have been AZEO, and I guess I could have used my debit card for those specific ones, but why use a debit card when I can earn rewards for my purchases.

[SouthJamaica]

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@Zoostation1 wrote:

My FICO9 scores that I pulled today dropped by 28pts (EQ), 24pts (TU) and 25pts (EX) after going from AZEO with 5% on one card, 0% second card, 4% aggregate) to 10% one card, 6% second card, 9% aggregate.  Does that seem normal?  I was expecting a a decrease from my June scores but not that significant.  FICO8 scores didn't get impacted much except for EQ.  -16 (EQ) even (TU) -3 (EX).  I don't have high limits on my cards ($2000 and $400 for the reporting, though that $400 has since become $1800) so even small changes in when things are paid off hit utilization harder.  Nothing else on my reports have changed, but since I may apply for another card in the next few months I want to make sure my 8 and 9 rebound as quickly as they dropped.

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It does seem extreme.  If the increase in utilization is the reason for the decrease in scores, I think it's not so much because of the percentages but because you went from 1 of 2 accounts with a balance to 2 of 2 accounts with a balance.

[TheKid2]

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@SouthJamaica wrote:

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@Zoostation1 wrote:

My FICO9 scores that I pulled today dropped by 28pts (EQ), 24pts (TU) and 25pts (EX) after going from AZEO with 5% on one card, 0% second card, 4% aggregate) to 10% one card, 6% second card, 9% aggregate.  Does that seem normal?  I was expecting a a decrease from my June scores but not that significant.  FICO8 scores didn't get impacted much except for EQ.  -16 (EQ) even (TU) -3 (EX).  I don't have high limits on my cards ($2000 and $400 for the reporting, though that $400 has since become $1800) so even small changes in when things are paid off hit utilization harder.  Nothing else on my reports have changed, but since I may apply for another card in the next few months I want to make sure my 8 and 9 rebound as quickly as they dropped.

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It does seem extreme.  If the increase in utilization is the reason for the decrease in scores, I think it's not so much because of the percentages but because you went from 1 of 2 accounts with a balance to 2 of 2 accounts with a balance.

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That's true. 100% of accounts now have a balance which the algos could look at as high risk and penalize bigtime.

[Thomas_Thumb]

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@Zoostation1 wrote:

My FICO9 scores that I pulled today dropped by 28pts (EQ), 24pts (TU) and 25pts (EX) after going from AZEO with 5% on one card, 0% second card, 4% aggregate) to 10% one card, 6% second card, 9% aggregate.  Does that seem normal?  I was expecting a a decrease from my June scores but not that significant.  FICO8 scores didn't get impacted much except for EQ.  -16 (EQ) even (TU) -3 (EX).  I don't have high limits on my cards ($2000 and $400 for the reporting, though that $400 has since become $1800) so even small changes in when things are paid off hit utilization harder.  Nothing else on my reports have changed, but since I may apply for another card in the next few months I want to make sure my 8 and 9 rebound as quickly as they dropped.

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There are a few things that may be coming into play with your score changes:

1. It appears you are on a thin scorecard. Thin meaning fewer than 4 accounts in your profile. A thin scorecard has algorithms that are tweaked to reacts more strongly to changes in revolving credit than non thin scorecards. Thin profiles with an installment loan on file help dampen score response to increased utilization particularly if the loan is open.

2. I can't tell from your info when your most recent account was opened or age of your oldest account. If most recent account is within the last 12 months that means your scorecard designation would be seeking credit as well as thin. Such a scorecard responds even more strongly to changes in utilization.

3. Age of oldest account can influence scorecard placement as well. Profiles with longer credit histories are considered established; those with shorter total credit history are classified as "new to credit". Established profiles with no derogs and no recent account adds will experience better score stability relating to increased utilization than thin profiles with a short total credit history.

My understanding is there are 4 or 5 primary scoring attributes associated with revolving credit and a time factor:

1. Aggregate revolving utilization

2. Aggregate revolving balance (total debt in dollars)

3. Individual card utilization.

4. Percent of revolving accounts reporting balances.

5. Total number of accounts reporting balances (this may include revolvers + installment loans).

12 months age is an important milestone for youngest account and 36 months for oldest account. AAoA may have some milestones at 6 or 12 month intervals along the way.

A) Aggregate utilization changes impact score more than individual card utilization changes of the same magnitude. My personal experience is that crossing above 9% aggregate utilization had a significant impact on score on all Fico models. I saw no impact at such low utilization on an individual card basis.

B) Going from 50% of cards reporting balances to 100% of cards reporting balances generally causes a substantial drop in Fico Mortgage scores but, a small drop on Fico 8 and Fico 9 scores. [if aggregate utilization is maintained in the same range].

If you are not applying for new credit anytime soon, experiment with reporting different levels of utilization both individually and in aggregate. First allow small balances to report on both cards, say under 5% on each. Then check scores. Next go back to AZEO and only report a small balance, under 9%, on your low credit limit card and check score. Then maintain AZEO but allow a larger balance to report on the low limit card which results in a 10% to 19% card utilization but maintains aggregate utilization under 5%.

Credit scores, other than 10T, are calculated using reported credit balances at the point in time data is pulled from each CRA. So, historical balances don't impact future scores.

[Zoostation1]

I'm definitely a thin dirty scorecard  and my oldest account is less than a year old.  I went several years with just a debit card before starting  my rebuild. I do want to apply for a new card in 2-3 months so I'll wait till after that to play around with different reported utilizations and stay AZEO until then. 

One thing you mentioned  that did catch my attention is the expected  change in mortgage scores to be more severe.  In my case they were impacted the least with only EX losing 4pts. At EQ 679, TU 699, EX 679 they're higher than my 8, 9, 10, and 10T scores.

[Thomas_Thumb]

Thanks for the additional info on your profile. You are definitely on a young/thin scorecard. The algorithms on this scorecard have been adjusted to put added weight to changes in revolving utilization both in aggregate and on individual accounts. I would suggest waiting until your youngest account reaches 1 year age before applying for additional credit cards. Definitely wait until your oldest reaches 12 months and try to maintain aggregate utilization below 5% leading up to an application.

You have a few age related milestones coming up which will help stabalize and enhance your credit score: Oldest account reaching 12 months, youngest account reaching 12 months and oldest account reaching 24 months.

It clearly looks like the majority of your score drop is related to increased utilization. This was pretty much validated by the smaller shift in mortgage scores relative to Fico 8 and Fico 9. Percent of cards reporting balances is more important on profiles with at least 3 cards. With only 2 cards it is better to scorewise to report small balances on both cards (100%) than no cards (0%). Although you don't want to do any testing now, I think you will find score drop with 2 cards having small balances vs AZEO with a small balance would be trivial (5 points or less). In contrast, no cards reporting a balance (all zero) typically results in a 15 to 20 point drop relative to AZEO.

[Thomas_Thumb]

Below is a graph showing how my daughter's TU Fico 8 score changed over time. She got her 1st card 12/2015 and a 2nd card 1/2016. She then stayed at the 2 card level and to this day has no installment loans open or closed. The stair step increases in score are likely aging effects associated with AoYA, AAoA and AoOA. Can't think of any other reason for it as any scorecard change would be age related as well. Her score surpassed 800 last year. (surpassing 800 related to AAoA and AAoA reaching 5 years?)

The spikes are due to changes in utilization (aggregate and individual card) and to a lesser degree # of cards reporting balances. She generally uses both cards every month and usually made multiple payments on each card every month. However, she did not try to control utilization below any specific thresholds.

Side notes:

1) The 12/2016 and/or 1/2017 step up can be associated with AoYA, AoOA and AAoA all reaching 12 months.

2) If the 3 most recent steps are really one step up starting 12/2018 and/or 1/2019, that would correspond to AAoA and AoOA reaching 3 years.

3) A bit baffled on the steps inbetween. Aging milestone at some TBD thresholds and a possible scorecard change sometime along the way?

[Zoostation1]

If worst comes to worst I can always pull out my debit card (I've all but stopped using it otherwise for security and the CC rewards) on the day my statement closes or day before to make sure I don't go over thresholds.  This last statement was a bit tricky for managing my closing balances with the both accounts having the statement close on a Saturday.  On my Discover, I didn't realize a transaction initiated late on the closing Saturday evening would get posted to that statement.  For my C1 card I paid the posted balance that Thursday because I was unsure if a payment initiated Friday would post before Saturday's closing, but I had quite a few pending transactions all posted Saturday.  All of this and seeing the charts has me really wishing I started the rebuild sooner instead of waiting till 4yrs after filing.